The proposal is discussed at the redevelopment team kickoff meeting last… (Luis Sinco / Los Angeles…)

Los Angeles officials are embarking on a $1-billion plan to tear down the notorious Jordan Downs housing project and turn it into a "new urban village" -- an effort aimed at transforming the Watts neighborhood that would be one of the city's largest public works projects.

The city wants to replace the project's 700 dilapidated units, which were built more than half a century ago, with taller "mixed-use" buildings that would house not just low-income residents but also those paying market rates. The new development could include as many as 2,100 units.

By creating a denser community that serves people of different incomes, officials hope to draw businesses to the complex, such as coffee houses, supermarkets and eateries. Officials believe this would help reduce the influence of gangs in an area that has long been the base of the Grape Street Crips and create better lives for Watts residents. Included in the price tag is a proposal to turn Jordan High School into what officials describe as a cutting-edge model campus.

"This will have a transformative impact not just on the Jordan Downs housing project but on the surrounding community as well," Mayor Antonio Villaraigosa said. "In order to make these communities thriving, you have to have a . . . retail component."

Already, L.A. officials have spent $31 million to purchase a 21-acre piece of land adjacent to the existing project on which they plan to expand. They have earmarked millions more for planning. The financing for the project would combine federal redevelopment money, state tax credits and private investments from retailers and developers of market-rate housing. Officials hope to get some money from President Obama's stimulus package and from the U.S. Department of Housing and Urban Development.

City officials plan to hold their first meeting between the private planning firm they have hired, WRT-Solomon, and community members at Jordan Downs today.

What remains to be seen is whether Los Angeles and its housing authority, which until recently has been plagued by scandal and mismanagement, can carry out such a bold transformation, especially in such grim economic times. Past efforts to modernize Jordan Downs have ended badly, with housing officials fired or forced to resign amid allegations that they broke rules or embezzled funds.

City officials argue that they have turned the authority, the largest housing agency west of the Mississippi, around in recent years. And they argue that the bad economy actually helps their cause, because in tough times, private developers find government-funded projects a safer investment than the vagaries of the open market -- a point on which real estate experts agree.

Development experts said the city's plan has possibilities but will not be easy to execute. Private developers may be eager to partner with the government in the current economy because a subsidized housing project brings with it income they can count on, they said.

"The question is, are you going to find retailers who want to go there?" said Tracey Seslen, a professor at USC's Marshall School of Business. Another big challenge is building attractive enough --and safe enough -- market-rate units to attract people who could live elsewhere.

In addition to the economic challenges of mounting a major redevelopment project, city leaders will also have to navigate difficult political waters. Some leaders warn that city officials must do a better job of reaching out to residents of Jordan Downs to make sure they are part of the process. On Friday, Rep. Maxine Waters (D-Los Angeles), who represents the area, issued a statement calling on Villaraigosa to get input for his plans from civil rights, religious and education leaders. Waters chairs the House subcommittee on Housing and Community Opportunity, which oversees redevelopment projects.

Some community activists see considerable promise in the project. "A lot of people from the outside community were scared to come here because they didn't know what we were about," said Betty Day, a community leader. "Give these people a chance here, because there's such beautiful people here."

In some ways, Los Angeles is taking up what other housing authorities around the country began doing two decades ago: redeveloping isolated, moribund housing projects that social scientists believed trapped the poor into a cycle of violence and poverty. Cabrini-Green in Chicago, Centennial Place in Atlanta and High Point in Seattle are examples they are looking to.

What makes Los Angeles' plan unique, according to John McIlwain, senior fellow for housing at the Urban Land Institute in Washington, D.C., is the chance to use the redevelopment of Jordan Downs as a catalyst to transform a large swath of South Los Angeles.

"Watts has a national reputation" as a high-crime, low-income neighborhood, he said. "Here is the possibility that they could actually turn Watts around."